Saturday, December 02, 2017

IADAB News - Edition 11: US Anaerobic Digestion and a UK Insurer's View of AD Risks

Date: 1 December 2017: This is Issue 11 of IADAB News Weekly, where we summarise the news of the week in the fast developing Anaerobic Digestion and Biogas Industry.
Advances in Anaerobic Digestion in the US followed by Starkly Realistic Legal Views on Insuring UK AD Plants.

This week we have positive news of two US AD Plants, followed by the need to improve UK AD industry's operational record, or else the industry will be likely to suffer high insurance costs or could even become uninsurable.


Alright, let’s get started…

The following is our intro video. Watch the intro video below, for a taster of what you will read if you scroll down below the video:




Watch this video on YouTube here: 

Video Transcript:

Our topics this week are the advances in the development of two anaerobic digestion facilities in the US, followed by extracts from a Clyde and Co., breakfast briefing highlighting what are starkly realistic legal views on the risks inherent in biogas production, and how those may have a damaging affect on insuring UK AD Plants in the future.

In our first article extract, we have more from  Michigan State University. They describe how thay have, in their own words "moved the needle on Anaerobic Digestion". And, we are told how A.D. facilities are popping up across the country, including some at college campuses.

Michigan State University, in East Lansing, Michigan, says it is leading the way with their own facility that processes between 20,000 and 24,000 tons of food waste annually to generate 380 kilowatts of electricity every hour for the campus, up to 2,800,000 kwH annually.

Our second article extract is from Massachusetts and Barstow's Dairy Store and Bakery, where they have expanded biogas production, and receive more than 14,000 tons of food waste annually. 

In addition they process  more than 9000 tons of manure a year from Vanguard Renewables farm.

Finally, we include a warning to UK AD plant operators to heed Clyde and Co's, views on insuring the very considerable multiple risks of AD Plant operation.

Clyde and Co. say that, "Going forwards, insurers may wish to consider to what extent AD plants fall within their risk appetite and consider whether increased reliance on survey subjectivities, section limits and exclusions may assist in managing their exposure accordingly."

It seems to be clear that if there are many more heavy insurance claims submitted for AD plant operations in the near future in the UK.

This could easily jeopardise the willingness/ ability of the insurance industry to insure AD plants in the future.
Now read on for this week's article extracts:

Michigan State University Moves the Needle on Anaerobic Digestion

Anaerobic digestion facilities are popping up across the country, including some at college campuses.
Michigan State University, in East Lansing, Mich., is leading with way with a facility that processes between 20,000 and 24,000 tons of food waste annually to generate 380 kilowatts of electricity every hour for the campus, up to 2,800,000 kwH annually.  
But Michigan State’s influence stretches far beyond its campus where ongoing research in Costa Rica and other South American countries is exploring methods to address challenging waste streams specific to certain regions.
On campus, a lot has changed since the university built its current domestic plant in 2013.
“When we launched on campus, we had a lot of fruits and vegetables. But we lost our produce supplier who went to compost,” says Dana Kirk, an assistant professor of biosystems and agricultural engineering at Michigan State. “We backfilled with milk processing waste.… And, we are working more with fats, oils and greases that we get from restaurants and from rendering plants that take residues from industry. So every year our feedstock has dramatically shifted. And getting the right mix is a balancing act.”
Currently, the university is exploring ways to extract better value from remaining digestate. The plan is to concentrate the nutrients in this digestate into smaller volumes of fertiliser, which can then be used on campus cropland and private farms. 
The process would not only increase product value, but reduce waste in discharged water, consequently cutting gallons that need to be hauled. via Michigan State University Moves the Needle on Anaerobic Digestion

Anaerobic Digester – Barstow's Dairy Store and Bakery

We receive more than 14,000 tons of food waste annually from food manufacturers, processors, and users such as Cabot Creamery, Geissler’s Supermarkets, HP Hood, Wind River, Cains, Garelick, Amenico, and McDonalds. The Vanguard Renewables closed-loop Farm Powered Organics to Energy Lifecycle combines that food waste with more than 9000 tons of manure a year from the into the farm in the in the 600,000-gallon anaerobic digestion tank.
The tank operates much like a cow’s stomach with microorganisms in the tank converting sugars, fats, and other compounds into biogas that powers a 300 kW engine annually producing more than 2,100 Mwh of electrical energy, 7,040 MMBTUs of thermal energy, and 30,000 tons of odor-free, organic, liquid fertiliser.  The system also sequesters 85% of the greenhouse gases produced on our farm.
With the current expansion just completed, we will be at 800kW. This is in large part a result of the growing success of the Massachusetts’ program to divert food waste from landfills and of an increasing interest from food companies to reduce their carbon footprint.
We now have the ability to produce our own low-cost energy to power the farm and hot water to heat farm buildings and our family homes. The Farm Powered anaerobic digester also provides renewable energy to the surrounding community via the Eversource grid and to the Cabot Creamery/ Agri-Mark Cooperative butter plant in West Springfield, Massachusetts. via Barstow's Digester

Finally, Clyde and Co., while talking to an audience of other insurers, meaning that the following has much to do with the insurance industry becoming more familiar with the risks associated with anaerobic digestion plant operation. They do have a point to make which the industry needs to take very seriously, while they were not addressing this piece to biogas plant operators.

So, we strongly suggest that the following sobering thoughts about insuring anaerobic digesters should also be headed by biogas plant operators.

Our opinion is that new biogas plant owners and operators may not initially fully realise how carefully these plants must be looked after. 

They will be, during commissioning influenced by their contractors. Quite understandably, during commissioning the biogas plant contractors who design the plants, are unlikely to be as willing to starkly highlight the real-dangers when biogas plant operation goes badly wrong, as the insurers will. 

Such disasters as could occur, are unlikely to happen at well-run AD plants, but allow things to get out of control and a biogas plant can do a lot of damage very quickly as has been seen in a couple of high profile UK anaerobic digestion plant installations in the last few years.

Read on and digest what the insurers are saying as extracted by us, and summarised from a much longer document:

Property & Liability breakfast Briefing from Clyde and Co - Insuring Anaerobic Digesters

Clyde and Co. looks at the property and liability exposures associated with anaerobic digesters and considers to what extent an ordinary property and liability policy may respond.
The management, maintenance and stocking of AD plants is, ... complex. Explosion, fire, asphyxiation and disease are inherent risks of the digestion process which need to be carefully monitored. 
In the wrong hands, AD plants are liable to fail catastrophically and can quickly generate first and third party losses. Whilst it might be assumed that such losses would fall outside standard property and public liability covers, this is not necessarily the case. ...
...Some key coverage and liability issues which arise in connection with AD plants under property and liability policies, are as follows:
AD plants can sustain damage because of design and construction errors, both of which tend to fall outside the scope of a standard first party cover.
A damaged AD has the potential to generate costly third party claims. 
Explosion, for example, may result in extensive damage to neighbouring land and buildings, causing business interruption and lost profits whereas an escape of matter from the AD tank can result in contamination of land and watercourses in private ownership.
Whilst a gradually occurring contamination will fall foul of most pollution exclusions, a "sudden" and "unexpected" incident, such as an escape of gas following impact, may be covered by an ordinary public liability policy.
Huge potential for third party claims also occurs in cases where the insured does not own the AD but plays a part in operating it for a third party who sells the biogas produced to the National Grid.
A typical public liability cover will respond to the insured's legal liability to pay damages. However, in the wake of an AD failure, the insured will often incur loss as a result of having to meet the costs of complying with mitigation measures required by the environmental regulator – the Environment Agency.
Whilst AD technology has some significant environmental benefits, it is, on a UK level, a relatively new technology which comes with risks that insureds may be unaccustomed to managing.
Going forwards, insurers may wish to consider to what extent AD plants fall within their risk appetite and consider whether increased reliance on survey subjectivities, section limits and exclusions may assist in managing their exposure accordingly. via Clyde & Co (en)

IMPORTANT: The above extract is a much shortened version of the Clyde and Co., document all readers must read the original pdf before relying on this summary. The authors of this blog take no responsibility for any inaccurate interpretation.

Coming soon: How AD can
mitigate air-pollution and
climate change.
This newsletter author's view is that the above extract highlights the reality that all AD Plant operators owe a responsibility to the AD Community above and beyond their normal responsibilities for their staff and the environment.

That is to avoid further incidents in the UK which could jeopardise the willingness/ ability of the insurance industry to insure AD plants in the future.

We make an appeal to all involved on AD sites to redouble their efforts to act with the utmost care and responsibility in operating their AD plants, seeking expert specialist advice wherever needed, to ensure that their plants don't cause the risks described by Clyde and Co., to become real-life incidents.

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